Market manipulation
has the capacity to damage the integrity of Europe's financial
markets. There is growing public concern and criticism over
the way in which financial crime has risen, and thus the reason
for the recent Commission proposal for a directive to cover
this area. The financial services sector still questions whether
a directive is the most appropriate legal mechanism for addressing
these issues, but remains strongly supportive of the overall
objective of developing a more consistent and effective approach
in dealing with market manipulation The key controversial point
in the proposal itself is the concept of intent/knowledge or
recklessness in market manipulation instances. The primary target
here is not those whose acts or omissions are purely accidental
and unintended, but those who had knowledge of what they were
doing. There are difficulties in proving this dishonest intent/knowledge,
and one of the most effective ways of drawing suitable distinctions
between deliberately dishonest behaviour and that which results
from a genuine accident is to establish specific statutory defences
and grounds for mitigating sanctions. Finally, the proposal,
for the first time applies insider dealing type provisions to
market dealings in commodity derivatives, which some practitioners
argue is inappropriate. without any explanation or prior consultation
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Background
EU member state governments have
rightly emphasized the importance of establishing an effective and
consistent approach to defining and enforcing market manipulation
as a "fundamental pillar" (to use the words in the Explanatory
Memorandum to the Proposal) to establishing a wider European capital
market. This need for a more effective process for dealing with
financial crime has been driven by growing public concern and criticism
over the way in which financial crime is (or, perhaps more accurately,
is not) prosecuted - a concern which found frequent expression in
newspaper stories and accusations about large amounts of public
money being wasted on failed prosecutions, "fat cat" legal
fees, legal incompetence by prosecuting authorities, derisory sentencing
and questionable defence strategies.
